Understanding the process of remortgaging as a contractor can alleviate any apprehension you may have, particularly if it’s your first time since moving into a contract role. In this guide, we will delve into the details of what remortgaging entails, why you should consider it, when the ideal time to remortgage is, and how to go about it.
To begin, let’s clarify what it means to “remortgage.” Essentially, it involves replacing your current mortgage agreement with a new one, either with your existing lender or a different one. Rest assured, it’s not as intimidating as it may seem even now you work via a limited company or umbrella.
There are several reasons why you might want to consider remortgaging as a contractor. Firstly, if your current deal is nearing its end, it is advisable to explore your options. Failing to switch to a new deal in a timely manner could result in being placed on your lender’s standard variable rate (SVR), which often leads to higher interest payments. Additionally, remortgaging allows you to access the increased value of your property by unlocking equity. This extra cash can be utilised for various purposes such as home renovations, investment in buy-to-let properties, or covering educational expenses. Furthermore, if you wish to make larger mortgage repayments than your current deal permits, switching to a deal without early repayment charges can bring you closer to a mortgage-free future.
Determining the right time to remortgage as a contractor is crucial. We recommend initiating your search approximately eight months before your current deal expires. For instance, if you are on a two-year fixed-rate deal, it is advisable to start exploring your options at the 16-month mark. This approach ensures that you have ample time to find the most favourable deal without feeling rushed or pressured.
It is worth noting that remortgaging before your current deal expires may incur early repayment fees. It is advisable to consult with a contractor remortgage adviser to assess the financial implications. While switching and paying associated penalties and fees may sometimes be more cost-effective in the long run, it is generally better to wait until your current deal concludes.
Of course, there are certain scenarios where remortgaging may not be the most suitable option. These include remortgaging to clear debt, which can often be more expensive in the long term, or when the remaining mortgage amount is relatively small.
The duration of the remortgaging process can vary. While finding and applying for a new mortgage deal typically doesn’t take long, it is important to consider (even taking into account your contractor status) the subsequent steps. These include completing paperwork, following specific processes, and potentially having your property valued if you are switching lenders. Taking all factors into account, the remortgaging process usually takes between 4 to 8 weeks to complete. Therefore, it is advisable to allocate sufficient time to ensure a smooth transition.
Now that we have covered the fundamentals of remortgaging, including its definition, reasons to consider it, the ideal timing, and the duration of the process, let’s explore a simple 5-step guide on how to remortgage your home.
Firstly, it is essential to find a Contractor remortgage specialist like My Contractor Broker to help review the marker and find the most suitable options. It is worth being prepared and organising all the necessary paperwork before commencing your search. This includes:
- Current Contract (signed)
- 3 months personal bank statements
- 3 months business bank statements (if trading via a limited company)
- Umbrella payslips
- Proof of ID and address.
After selecting suitable quotes, you can proceed to make your application. If you are sticking with your current lender, this is referred to as a “product transfer,” which typically does not require additional legal work. However, if you are switching to a new lender, you will either be allocated a conveyancer by the new lender or need to appoint a conveyancing solicitor to handle the transfer of deeds.
Once these steps are completed, your contractor remortgage is finalised. If everything goes smoothly, you will receive a mortgage offer that meets your requirements, which you can accept. If you are transitioning to a new mortgage provider, they will confirm the settlement of your old mortgage, and you will commence making monthly payments to them moving forward. It’s a relatively straightforward process.
If you choose to remortgage with My Contractor Broker, we streamline the entire process for you. In addition to following the aforementioned steps, we expedite and simplify the process further. We will identify the best contractor remortgage deal for your specific needs and handle the submission and follow-up on your behalf. Once you are ready to proceed, simply answer a few questions to provide us with more information about your situation, such as whether you reside in the property or rent it out, and the end date of your fixed term.
Once we have a clear understanding of your requirements, we will assign you a dedicated contractor remortgage expert. As a whole-of-market broker, we have access to nearly every mortgage deal available, including exclusive offers that banks may not provide directly. Your remortgage expert will handle all aspects of the application process and ensure that everything progresses smoothly. If any updates are required from the lender, we will take care of the necessary follow-up.
The best part is that throughout the entire process, you will have the support of a remortgage expert and a dedicated case manager. Additionally, you can track the progress of your application through our online dashboard until the process is completed. It’s a seamless experience.